In a ruling that has attracted global attention amid rising concerns over AI-driven job losses, China’s Hangzhou Intermediate People’s Court has held that terminating an employee solely because artificial intelligence can perform the same job at a lower cost is not a lawful reason for dismissal. The verdict is being viewed as a significant precedent at the intersection of technology and labor rights.
The case involved an employee identified as Zhou, whose company attempted to restructure his role after claiming AI could perform the job more cheaply. The firm proposed reducing his salary from 25,000 yuan to 15,000 yuan. When Zhou refused the pay cut, he was dismissed.
Zhou challenged the decision through labor arbitration and won compensation for unfair dismissal. The company then appealed the case to the Yuhang District Court, as required under Chinese labor law.
The court upheld the arbitration ruling, stating that cost-based replacement through AI does not meet legal grounds for termination, which are limited to serious restructuring or inability to continue employment. It also found the salary reduction unreasonable and the dismissal unlawful.
On further appeal, the Hangzhou Intermediate People’s Court reaffirmed the decision, noting that while AI adoption is a legitimate business strategy, it does not override employees’ legal protections. The court emphasized that technological progress must not come at the expense of workers’ rights.
The ruling has sparked wider discussion globally as companies increasingly adopt AI systems. While binding only in China, it is seen as an important reference point in ongoing debates about automation, labor law, and ethical use of AI in the workplace.
